When would it make sense for a home owner to refinance his mortgage? A) When it

Question

When would it make sense for a home owner to refinance his mortgage?

            A)   When it appears that interest rates are going to remain stable for at least five years.

            B)   When interest rates have decreased enough to make it worth his while to front the refinancing costs involved.

            C)   When interest rates have increased enough to make it worth his while to front the refinancing costs involved.

            D)   When he has accumulated more than 20% of equity in the property.

            E)    Only when he intends to keep the property for no more than six months

Explanation / Answer

Home owner will refinance his mortage when interest rates have fallen enough so that the efforsts and cost to refinacne the loan is less than the refinancing costs.

So choice B is correct answer.

If Interest rate is stable, no point to refinance the mortgage and pay the refinance cost. So option A is Incorrect

If interest rate have increases, we would not like to refinance. Hence option C is wrong

Refinancing has nothing to do with Equity stake in the property. Hence Option D is incorect

Even if he intends to keep the property for more than 6 months and interst rates have dropped, home owner should refinance to save more on interest costs. Hence Option E is also Incorrect.

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